n the past six years, Bolivia has become one of the Latin American countries most successful at improving its citizens’ standard of living. Economic indicators such as low unemployment and decreased poverty, as well as better public healthcare and education, are outstanding.

Between 2005 and 2010, the proportion of those in moderate poverty went down from 60% to 49.6%, while extreme poverty fell from 38% to 25%. Likewise, the unemployment rate decreased from 8.4% to 4%. The United Nations Development Programme (UNDP) points out that Bolivia is the top country in Latin America in terms of transferring resources to its most vulnerable population – 2.5% of its GNP.

How did Bolivia do all this? By ignoring the austerity jackals:

These economic and social successes have been attained following an alternative route to neoliberalism. Evo Morales’s government did the opposite of what the Washington Consensus recommends: it nationalised hydrocarbons, electricity, telecommunications and mining; renegotiated the presence of direct foreign investment in the country; implemented an expansive fiscal policy and closed borders to the free importation of economically strategic products. The state took 34% of the economy under its control.

This exceptional performance was obtained even though remittances decreased, the United States revoked the most-favoured nation status for some Bolivian products, and in spite of a global recession. The oil income is now three times that of 2005. The tax revenues went up. The international currency reserves are up to more than $12bn dollars. The banking savings-and-loans system has been “Bolivian-ised” and the external debt has been reduced. The bid now is that Bolivia will take a “big industrial leap” in the next five years so that it ceases to be an extractor of natural resources and begins to export value-added goods.

Miller apparently doesn’t know that China pegs its currency against the dollar. In order to keep the yuan from rising against the dollar, it has purchased over $1 trillion of U.S. assets over the last decade. The United States is in fact not “relying” on China to finance its current consumption. In fact, the official policy of both the Bush and Obama administrations was that we wanted China’s government to stop buying up dollars and thereby depressing the value of the yuan. [While this is the public policy, this may not be the actual policy, since many powerful interests like Wall Street banks and major retailers benefit from the over-valued dollar.]

This would allow the dollar to fall. That would make Chinese imports more expensive to U.S. consumers and U.S. exports cheaper for people in China. That would cause the U.S. trade deficit with China to fall, and possibly turn to a surplus, which is the textbook relationship between rich countries and poor countries.

In the case of Europe, the problem is that the German government and the European Central Bank (ECB) are trying to impose austerity across Europe. The ECB has all the euros it could possibly need to bail out Greece, Italy and anyone else in sight. However, rather than use its ability to print euros to save Europe’s economy, the ECB is trying to force cutbacks in social spending and protections for workers across Europe. The trip to China to seek support for a bailout was a silly diversion from the real issue.

And, just like the German austerity jonesers who don’t seem to mind that “punishing” the “sinner” nations is killing Germany’s economy as well, Miller — who like almost every other US economic writer allowed access to the pages of a major establishment newspaper, utterly failed to see, much less warn anyone about, the housing bubble of the 1990s and 2000s as it was bubbling (Krugman, as always, being the chief if not sole exception) — doesn’t see, or doesn’t care, that austerity will kill the American economy as well.

The old joke is that robbers hit banks because that’s where the money is.

If Congress hopes to resolve the nation’s budget deficit problem, it’s going to have to go after entitlement spending for the same reason, says Senator John Kerry.

That is one of the hard truths the Massachusetts Democrat offered up as he settles into his role as one of 12 members of the congressional “supercommittee’’ charged with cutting an additional $1.5 trillion from the deficit during the next 10 years.

Why is Kerry pushing to put us all on cat food rather than raise taxes on the rich back to, say, Eisenhower-era levels? Scuttlebutt is it’s because he’s angling for a job in the austerity-jonesing Obama’s administration, probably as the next Secretary of State.

The campaign to reduce government deficits has come in response to a European debt crisis that could endanger the global banking system. And the budget cutting has been coupled with a reluctance by the the European Central Bank to stimulate economic growth like the Federal Reserve has in the United States; the ECB has instead raised interest rates twice this year to contain inflation.

Those steps have sucked hundreds of billions of dollars out of a European economy that may be edging towards recession.

Such a downturn, by choking off government revenues and increasing the demand for public services, could put struggling countries such as Spain and Italy at risk of missing the very deficit-reduction targets that budget cuts and other austerity measures were meant to achieve.

I’ve been seeing more pro-Keynesian rumblings lately. Could it be that some of the elites realize that they may be slowly smothering their own golden geese and need to back off from the neoliberal plan to destroy public social services worldwide?

Let’s note, at the start, that this downgrade was absurd. The credit rating of the United States is not in jeopardy. The U.S. government prints dollars — it can no more run out of dollars than a bowling alley can run out of strikes.

What’s really happening is an attempt by both parties to justify slashing Social Security and Medicare. Republicans have long wanted to roll back the New Deal. What is relatively new is that a Democratic president is now dead-set on cutting these programs as well.

President Barack Obama, in his speech Monday about the downgrade, used the market turmoil as an excuse to do just that. After a debt ceiling deal in which the Democrats argued that defense spending cuts – not entitlement cuts — could close the long-term deficit, Obama said Monday that there’s “not much further” he can trim defense. Despite the fact that defense spending has gone up on his watch. Instead, Obama said, we need cuts in social spending, or, as he phrased it, “modest adjustments to health care programs like Medicare.”

In effect, there seems to have been a merger of both parties into a single force advocating for the interests of bondholders and the cutting of Medicare and Social Security. It’s why both Republicans and Democrats are now blaming each other for the downgrade — as if the downgrade is to be taken seriously.

[…]

Strange and ominous political eddies are already emerging. Congressional disapproval is higher than 80 percent. This could turn ugly – as it has before in U.S. history. While we’ve airbrushed the legacy of political violence out of U.S. history, it’s there. Labor conducted gun battles with Pinkerton private military forces in the late 19th century. Strikes often turned deadly in the 1930s. If there are serious defense cuts, the prospect of hundreds of thousands of war-weary former soldiers thrown into a terrible economy is not, shall we say, a recipe for social stability.

With proposals on the table to cut defense and social spending in a deflationary economy, maybe U.S. political leaders are just throwing one final, blow-out empire-ending party.

I don’t mean to push the panic button. After all, America has a stable political order that can handle a great deal of stress. This system, though, is rooted in a middle class that believes its interests are aligned with those running the country.

As the wealth, opportunity, social status and economic security of the middle class evaporates, so, too, could this belief.

We don’t not want to find out what happens if we should reach that point. But if politicians keep using S&P to justify bondholder-friendly policies that damage the interests of the middle class — we just might.

Like this:

Ever since seeing Eliot Spitzer taken down just as he was about to get medieval on Wall Street, it’s hard for me not to wonder about the timing or intent of sex charges filed against certain prominent people who are almost never conservatives. (Google “arnold schwarzenegger rape” and you’ll see that all sorts of dark stories, going far beyond his serial gropings, followed the Gropenator all throughout his time in office, yet he never had to do a perp walk. He was so well protected that he was able to wait until after he left the Governor’s Mansion in Sacramento before he confessed to Maria that he’d fathered a kid by their longtime housekeeper. This triggered a divorce, but of course Arnold doesn’t need Maria’s Kennedy money any more — he’s got lots of his own by now and since he’s retired from politics, he doesn’t need her for window dressing any more either.)